340B-Related Inquiries and Self-Disclosures

Speaker 1 (00:04): Welcome to 340B Insight from 340B Health. David Glendinning (00:13): Hello from Washington DC and welcome back to 340B Insight. The podcast about the 340B drug pricing program. I'm David Glendinning with 340B health. Our guest today is Emily Cook, a partner at McDermott Will & Emery. We cut up with Emily in between sessions at the recent 340B Coalition Winter Conference in San Diego. She was one of the experts speaking at a new session on 340B compliance. We spoke with her about how the 340B team works with the legal and compliance department, to ensure they run their programs according to federal and state rules. But before we go to that interview, let's take a minute to cover some of the latest news about 340B. David Glendinning (01:04): A 14th drug company has added its name to the list of drug makers, imposing restrictions on 340B pricing for drugs dispensed at contract pharmacies. Starting April 1st, GlaxoSmithKline says it will cease offering discounts to 340B hospitals, on nine of its best selling brand name products, unless the hospitals submit contract pharmacy claims data to the company. The affected GSK drugs include some of its top inhaler medications for patients living with asthma and COPD. David Glendinning (01:36): And a federal judge in Delaware has vacated in enforcement action, taken by the government against AstraZeneca in May 2021. This means that two courts now have ruled largely in favor of the government and two have ruled largely in favor of the drug companies. The previous decisions have been appealed to higher courts and 340B Health is calling for a government appeal of the latest decision as well. Our members can access more details about the court decision and the GSK policy in the show notes. David Glendinning (02:15): And now for our feature interview with Emily Cook from McDermott Will & Emery. We know a major priority for many of you is running 340B programs that are compliant with the 340B statute and government regulations. Legal and compliance experts such as Emily, play a major role in ensuring that happens. Miles Goldman recently sat down with her in our podcast studio at the 340B Coalition Winter Conference to hear more about that important work. Here's that conversation. Miles Goldman (02:46): Thank you, David. I'm joined by Emily Cook, who's a partner at McDermott Will & Emory, LLP. And we're here at our booth at the 340B Coalition Winter Conference. Emily, welcome to 340B Insight. Emily Cook (03:02): Thank you so much for having me and it's so great to be joining you here at the 340B Coalition Conference. Miles Goldman (03:07): I know it's great. We're in person and sitting across from each other, which is something we haven't been able to do with a lot of our guests. Emily Cook (03:15): Great. Yes. And it's so nice to see all the attendees walking by as well, this is a really nice setup. Miles Goldman (03:20): So we're going to be discussing today how the legal and compliance department helps 340B professionals and getting into inquiries and also obligations for self disclosures. You're a lawyer, yourself. What expertise does legal counsel bring to 340B compliance? Emily Cook (03:40): Legal counsel is critical for 340B compliance. The 340B statute is what determines compliance for a 340B program. As many folks listening to this podcast will likely already know, the federal government has set up the 340B program in a way that is unusual among federal programs. We have the statute and while most federal programs would then have regulations or what are known as notice and comment rules that provide additional guidance and requirements to entities that participate in that federal program, we do not have that with the 340B program. We just have the statute. So in order to ensure a compliant 340B program, we can only look to the law and it is important to have legal counsel assist in interpreting that law, to ensure that the 340B program at a particular covered entity is compliant. Miles Goldman (04:39): Let's go into further detail then on some of those legal and compliance issues that relate to 340B, but aren't covered by the statute. Emily Cook (04:47): Sure. The one we see most frequently is Medicaid billing. While the 340B statute does address what are known as duplicate discounts or circumstances where a drug manufacturer is not required to provide both a 340B discount and a Medicaid rebate, 340B billing to state Medicaid programs is regulated by state law, and to some extent, federal law. And those laws are separate and apart from the 340B statute. Similarly, right now under the Medicare program, there are also billing requirements for 340B drugs. Miles Goldman (05:24): In your presentation here at the conference, you spoke about how there are different types of compliance related inquiries and self-disclosure obligations. Why do these occur? Emily Cook (05:36): Sure. So looking back to those Medicaid and Medicare laws that we were just discussing, there is a federal statute that requires participants in federal healthcare programs, such as Medicare and Medicaid, to identify and then research and quantify over payments of federal funds. And so under those separate statutes, again, separate and apart from the 340B statute, there are obligations to return over payments of federal funds and failure to return those over payments once they are identified, can result in additional penalties, sometimes significant additional penalties, such as trouble damages or three times the amount of the initial overpayment. So it is critical for 340B covered entities to understand those different types of compliance obligations, and those that run from the 340B statute, and those that are governed separately. Miles Goldman (06:33): Because 340B professionals they're often still having to manage these challenges. Emily Cook (06:38): Yes. And actually that is one of the goals of the presentation today at the conference is to discuss the critical importance of including compliance and legal professionals with the 340B team, because the 340B team is often very focused on those 340B compliance elements that run from the 340B statute. And without that knowledge of the other requirements, as well as the support from other folks within the covered entity to ensure that the right folks with the right skill sets are working on the broader range of 340B issues, things can fall through the cracks. Miles Goldman (07:20): And it sounds like definitely, as you noted before, falling through the cracks, certainly reads to some really negative consequences. Emily Cook (07:27): Yes. Interestingly, one of the ways to differentiate between the two sets of requirements that we've been talking about are those that involve federal funds and those that don't. So with the 340B program, while there are certainly a lot of dollars involved, those dollars are not federal dollars. They are not actual money that comes from the federal government to the covered entity, the discounts are funded by the drug manufacturers. Versus the Medicare and Medicaid program and other federal healthcare programs where the funding for those programs is directly coming from the federal government, from taxpayer dollars, and those two pools of money and the compliance obligations associated with them are treated very differently. Miles Goldman (08:13): Let's talk more about the trends you are seeing. In terms of the inquiries and self disclosures, what do those look like over the last few years? Emily Cook (08:22): We are certainly seeing states become more interested in looking at payments for 340B drugs. The prime example of this is in California, where we have seen California's Department of Healthcare Services, their Medicaid regulatory agency, roll out a series of what they are referring to as self-audit demands, where they are requiring 340B covered entities to self-audit their Medicaid payments received for 340B drugs, and if those covered entities identify overpayments, that is they've received more money than they should have received, perhaps because they did not bill at actual acquisition cost or apply the appropriate claim modifier for those 340B drugs, they are then required to return those funds to the state government. So we have seen the state government in California, and we anticipate in other states, looking at those 340B billing requirements, determining that they do create a risk of overpayments and then taking steps to recoup those over payments from the covered entities. Miles Goldman (09:31): Are there any other trends we should be aware of? Emily Cook (09:34): We should also be looking at the requirements more broadly and enforcement generally at the federal and state level of billing, compliance and overpayments. So while we here are very focused on the fact that these billing rules are specific to 340B drugs, we certainly are seeing at the state and federal level, increasing focus on overpayments of federal and state funds. And it's not specific to 340B, it is an overall initiative of federal and state governments to try to identify circumstances where providers have been overpaid and to obtain repayment of those funds. Miles Goldman (10:17): I think this is really all a good reminder, especially as we're talking about the state elements to this, that 340B, is something that states also look at. We tend to think of it, because it is, on the surface, a federal program. Emily Cook (10:33): Yes, interestingly, we have seen increased activity at the state level in part because of changes at the federal level. So several years ago, the federal government changed some of their requirements that they placed on state Medicaid programs to pay certain rates for Medicaid drugs, including 340B drugs. And because of those federal requirements that were placed on the states, many more states are implementing some form of billing requirement for 340B drugs. Emily Cook (11:05): We've known for a while that many of them have modifier requirements to help identify 340B drugs for duplicate discount purposes. But now many of them are using those modifiers combined with what are known as actual acquisition cost billing requirements, that is, billing the state at the actual cost to acquire the 340B drug, to pay the covered entities at their actual acquisition cost, which is almost always below the Medicaid fee schedule amount. So if a covered entity does not apply those modifiers to identify the claims and does not adjust the billing rate to the actual acquisition cost, they will likely be overpaid generating that over payment, that then requires the special handling that we've been talking about. Miles Goldman (11:50): I want to talk more about the step by step processes involved with all of this. Are there steps 340B hospitals should implement to prepare for an inquiry or self disclosure? Emily Cook (12:03): 340B hospitals should have existing compliance plans, not just specific to 340B, but a compliance plan for the hospital as a whole. And as part of that compliance plan, there should be elements that address Medicaid billing. Again, this is not necessarily specific to 340B, so there should be overall review and analysis of claims for consistent reporting with Medicare and Medicaid rules. Many covered entities that participate in the 340B program will then also look specifically at the 340B requirements, because they can be more difficult to comply with in some of the Medicaid and Medicare billing rules that apply more broadly to all services provided by the hospital. In addition, one of the requirements under the federal overpayment rule is that if a healthcare provider learns that they might have received an overpayment, they are obligated to investigate that potential overpayment. Emily Cook (13:06): So if a covered entity suspects that it may have, for example, not billed Medicaid claims at actual acquisition costs, or inappropriately reported a dispensing fee that they were not eligible to report, or not applied modifiers that may have impacted the claims payment, they are then obligated to investigate that potential non-compliance, to determine if it has created an overpayment, and if so, quantify that overpayment. The expectation is that investigation should take less than six months, but there is a timeframe that is expected. It is expected to be moving forward towards quantifying that overpayment, and then once that overpayment is quantified, the provider then has 60 days to return it the appropriate federal agency. Miles Goldman (13:57): So let's say a federal agency reaches out with an inquiry, what comes next? Emily Cook (14:02): Sure. So we do see, again, both state and federal agencies that regulate healthcare programs and make payments of federal funds, do their own investigation and reach out to providers that they believe may have received funds improperly. We increasingly are seeing, particularly on the federal side, robust use of data analytics, to identify billing and payment patterns, that may indicate potential non-compliance and overpayments. And when a provider receives one of those inquiries, and they may come directly from a federal agency or one of their contractors, so it's important to make sure that if you receive something that looks like it may be an inquiry from a federal state agency, that you do not disregard it, that you respond promptly and begin that investigation to determine whether there may in fact be non-compliance and a potential overpayment. Emily Cook (14:59): Failure to respond to those notices can have significant consequences, including additional penalties, and in some cases, the nature of the non-compliance can even result in criminal penalties. So again, for those folks who are specifically working in the 340B space, these may not look like the inquiries you're used to getting, because it is not going to look like a HRSA audit request. It will come from a very different agency, typically, it will come from the centers for Medicare and Medicaid services. Miles Goldman (15:31): Let's talk about resolution. How do these different types of inquiries and self-disclosure issues typically get resolved? Emily Cook (15:40): It depends very much on the underlying facts that resulted in the non-compliance, so in the case of a routine billing error. So for example, a covered entity determines that it did not bill a handful of claims for a discreet period of time at the actual acquisition cost to the state Medicaid program, resulting in an overpayment. We see this happen often as a result of delays in uploading invoice prices for 340B drugs or circumstances where two different NDCs may have two different actual acquisition costs, and the wrong one is uploaded into the billing system. Emily Cook (16:26): In those circumstances, where it is an administrative error, the dollar value is not significant, and the underlying issue is discreet and corrected. Those are often able to simply be returned to the state through the state Medicaid overpayment refund process. Every state has a different process. Some have a form, others require that you call someone to discuss, but in all instances, there will be a process where those funds can fairly easily be returned directly to the state. In circumstances where there may be other compliance issues involved, the way to resolve those can be more complicated and may involve, for example, a self-disclosure to the Office of Inspector General, those self disclosures often come with a penalty associated with them. Miles Goldman (17:22): How long does it take to resolve these? I'm sure that probably depends again on the scenario, but is there a general range? Emily Cook (17:28): It does. I will say that my experience is that 340B related overpayment investigations, take much longer than some other types of investigations. The actual time that they take does really depend on the nature and scope of the non-compliance, but generally the expectation would be that it is at least several months to get from, oh no, we've discovered we may have an issue, to here is the exact dollar value of the overpayment. And then typically several more months to go from, we've reached out to the state to tell them that we have an overpayment, to actually having the check sent to the state and a determination that the matter is closed. Miles Goldman (18:15): We've spoken already a bit about the interaction between a 340B team and a legal and compliance department at a covered entity. Who should be included in the ideal 340B compliance team? Emily Cook (18:28): The ideal 340B compliance team should include individuals who have knowledge of both the 340B program, generally, the 340B operations at the particular covered entity. The federal healthcare program compliance requirements, as well as the legal obligations to address the non-compliance and the various mechanisms for resolving that non-compliance. It is important that the full team be involved or at least consulted at the outset of any potential non-compliance investigation, to ensure that the right folks are involved and in the right capacity. So it is always going to be important at the outset, for example, to have legal counsel involved, to determine, is this actually an issue? Are there arguments that this is not non-compliance? What is that risk analysis? Miles Goldman (19:24): Emily, this has been a great conversation, a lot of important takeaways for compliance for 340B professionals to know about both within 340B, and as you said, things that are outside of the 340B statute. Thank you so much for taking the time to speak with us here at the Coalition Conference. Emily Cook (19:43): Thank you so much for having me. David Glendinning (19:45): Our thanks again to Emily Cook for sharing some of her 340B legal and compliance expertise with us. We appreciate the invaluable work that she and other members of these teams do to help 340B professionals run compliant programs so they can focus on providing more care to patients in need. 340B compliance is a broad and important subject and we would like to know what elements of this topic you would like to hear us cover on the podcast. Please email episode ideas and feedback to podcast@340Bhealth.org. We will be back at a couple of weeks. As always, thanks for listening and be well. Speaker 1 (20:29): Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340Bpodcast.org. You can also follow us on twitter at @340Bhealth and submit a question or idea to the show by emailing us at podcast@340Bhealth.org.